Salixs Focus Remains on Target-3 in the Near Term

On June 17, the FDA completed its advisory committee (AdCom) on the assessment of the potential risks of cardiovascular adverse events associated with therapies for the treatment of opioid-induced constipation (OIC) in patients taking opioids for chronic non-cancer pain. The product in question for Salix is its subcutaneous injection of Relistor with partner Progenics (PGNX $4.22). The AdCom s formal vote on the question of Should the FDA require cardiovascular outcomes trials for peripherally active mu opioid receptor antagonists being developed for the treatment of OIC in patients with chronic, non-cancer pain was 7 Yes (for all peripherally active mu opioid antagonists), 5 Yes (only for specific peripherally active mu opioid antagonists), 12 No, and 0 Abstain. However in follow-up discussions AdCom members noted confusion in their vote, with 5 members changing their vote from Yes (for all peripherally active mu opioid antagonists) to no. Accounting for this the vote was 2 Yes (for all peripherally active mu opioid antagonists), 5 Yes (only for specific peripherally active mu opioid antagonists), 17 No, and 0 Abstain.

Importantly, the committee recommended that observational studies be conducted on a post-marketing basis. We view the outcome of the committee as more positive than expected; however, the FDA still holds significant leverage in its ability to view Relistor differently from the Nektar s (NKTR $12.54, Outperform) naloxegol. Recall that while the original safety signal raised for the class came out of the alvimopan development program, the FDA was not swayed by the open-label safety data submitted in the prior regulatory review and, in our view, naloxegol from Nektar submitted data that may be more favorably viewed by the regulators, given the 1- year, placebo-controlled study design.

Salix expects to hear from the FDA s Office for Drug Evaluation within 30 days of the meeting regarding the appeal for the Relistor Complete Response Letter. Following the response to the company s appeal process, which specifically surrounded the need for a long-term cardiovascular safety study preapproval, the company will then work with the Division of Gastroenterology to address the other concerns raised within the CRL prior to a possible approval/non-approval decision.

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While we are still conservative on the potential for approval of this product, an approval could provide an unanticipated growth driver for the company. Prior management guidance had been for a $500 million in peak-year sales for the injectable formulation and $1 billion for the oral formulation. In addition, Relistor could be launched in early 2015, along the same timing of Xifaxan in IBS-D, but we continue to take a we ll believe it when we see it approach, given the significant delay the product has had to date.